KYC is going to be a mainstay in the crypto world at some point. Governments aren't going to allow people to make a dime and them not get their 9 cents of it.
Unless there is a huge pushback by crypto enthusiasts, it seems just a matter of time before crypto casino/gaming and KYC become synonymous with each other. Whether it will be because various governments want their share via taxation or because they want to keep tabs on various blockchain transactions and link them to a particular individual, KYC will probably go down the route you described.
I don't use freebitco but have kept up with the drama. I messed around in the past with them and get emails now and then. Is everything back to normal with the site?
Right now we simply do not know. Their previous forum representative was moved over to focus on other matters and a new account was created to assist with queries and to provide updates but many in their thread are not happy with long periods of silence. In the meantime there are some newbies claiming they no longer have issues withdrawing whereas some are complaining the issue still exists as well as complaining about waiting for days for customer services to still reply to their emails.